Good day, and welcome to Symantec's Third Quarter 2011 Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the call over to Ms. Helyn Corcos, Vice President of Investor Relations. Please go ahead.

Helyn Corcos

Thanks everyone. Good afternoon, and thanks for joining our call to discuss fiscal third quarter 2011 fiscal results. With me today are Enrique Salem, Symantec's President and CEO; and James Beer, Symantec's Executive Vice President and CFO. In a moment, I will turn the call over to Enrique. He will discuss how Symantec executed during the quarter, then James will provide highlights of our financial results, as well as discuss our guidance assumptions as outlined in the press release. This will be followed by a question-and-answer session. Today's call is being recorded and will be available for replay on Symantec's Investor Relations website. A copy of today's release and supplemental information are posted on the website, and a copy of today's prepared remarks will be available shortly after the call is completed.

Before we begin, I'd like to remind you that we will review our financial results, focusing on year-over-year current constant currency rate, unless otherwise stated. Sequential growth rates are based on as-reported results. For December 2010 quarter, the weighted average exchange rate was $1.35 per euro and the end-of-period rate was $1.33 per euro, compared to our guided rate of $1.35 per euro. For the December '09 quarter, the weighted average rate was $1.48 per euro and the end-of-period rate was $1.43 per euro. We've included a summary of the year-over-year constant currency and as-reported growth rates in our press release and in our supplemental information. Please note, due to recent fluctuations in currency rates, we have decided to guide to an exchange rate of $1.35 per euro for the March 2011 quarter, contrary to the original foreign currency view of $1.30 we noted on our January 12, 2011, foreign currency update.

Some of the information discussed on this call, including our projections regarding revenue, operating results, deferred revenue, cash flow from operations, amortization of acquisition-related intangibles and stock-based compensation for the coming quarter contains forward-looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in the statements. Additional information concerning these risks and uncertainties can be found on the company's most recent periodic report filed with the U.S. Securities and Exchange Commission. Symantec assumes no obligation to update any forward-looking statement.

In addition to reporting financial results in accordance with Generally Accepted Accounting Principles, or GAAP, Symantec reports non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP results, which can be found in the press release and on our website. Now I would like to introduce our CEO, Mr. Enrique Salem.

Enrique Salem

Thank you, Helyn, and good afternoon, everyone. I'm very pleased with our double-digit bookings growth and solid performance across all product lines and regions. This led to better-than-expected results and drove record deferred revenue. We benefited from strength in Consumer, Backup and Data Loss Prevention, as well as stability in the Storage Management business. In addition, our recent acquisitions exceeded expectations and continue to deliver strong results. Now let's take a closer look at some of the highlights from the quarter.

Consumer delivered another solid quarter of mid-single-digit revenue growth, driven by the strength of our market-leading products and breadth of our multi-channel distribution. We continue to expand our free Norton Security Scan and Norton PC Checkup services into alternative channels such as DivX, W3i, Mindspark, LG Electronics, Paltalk, ICBC and Adobe. These types of new relationships allow us to reach more than 350 million consumers that may not be using traditional Norton products and introduce them to our full line of security suites and services. The trend in our trial conversion rates stabilized during the quarter, as the team continued to focus on enhancing the trial experience. Our ability to target offerings through our dynamic eCommerce platform benefited subscription renewals and helped us to upsell and cross sell consumers to our premium suites and services. Our new 2011 products offer the fastest and most effective security protection without sacrificing PC performance. The 2011 products have won 54 awards and received 329 positive reviews, more than any other competitor.

Our Backup and Archiving business, NetBackup, posted double-digit bookings growth, driven by strong demand for virtual machine protection and deduplication. We're the only company to provide deduplication at the client at the media server through either software or an appliance. Our new NetBackup 5200 appliance series is the industry's first all-in-one hardware and software backup solution with integrated deduplication. Initial customer response has been very positive. We continue to see strong customer adoption of our capacity-based pricing model, which positions us well to take advantage of the growth in unstructured information.

In the SMB segment, Backup Exec generated its third consecutive quarter of double-digit bookings growth. We are seeing increased loyalty from our channel partners as we continue to build momentum in the SMB market. Windows IT Pro named Backup Exec the Best Backup Software Product. In addition, Redmond magazine selected Backup Exec as the best backup and recovery product for the fifth consecutive year.

Performance of our Storage Management business stabilized during the quarter. For example, State Street Bank chose to expand their use of Storage Foundation throughout their business-critical data centers because of our unique ability to manage heterogeneous IT environments. Customers value our ability to help them reduce cost and accelerate the adoption of virtualization and cloud solutions.

Our Enterprise Security business delivered solid results, with strength in Data Loss Prevention and our recent acquisitions. Recent media attention surrounding WikiLeaks and sophisticated malware attacks, such as Aurora and Stuxnet, have resulted in increased CISO interest in our leading data protection solutions. The complimentary nature of our encryption offerings, coupled with our Data Loss Prevention solutions, help customers prevent information loss. In addition, we make it possible for customers to secure industrial control systems and build out smart grid infrastructures. By addressing these challenges, we are developing meaningful customer relationships, allowing us to cross sell more of our Endpoint and Mail Security suites, especially in the largest enterprises in the world.

Our recent acquisitions also drove strength in our Enterprise Security business. I'm very pleased with the team's focus on growing these businesses and integrating operations. The Trust Services team, which manages our SSL business, achieved its highest bookings in nine quarters and grew the installed base double-digits. We are driving increased enterprise adoption of our premium VeriSign SSL offerings with unique features, such as certificate management, malware scans and Seal-in-Search. In addition, we are successfully taking advantage of our GeoTrust and Thawte brands to take share in the more price-sensitive segments of the market.

We completed the integration of VeriSign's management console into Symantec Protection Center. We also completed the integration of Seal-in-Search into our Norton security products. Through Norton, we are already generating more than 75 million additional Trust Seal impressions per day. Furthermore, we are leveraging VeriSign's retail website to cross sell our Norton products. We continue to leverage the PGP and GuardianEdge encryption products in our distribution channels, and have moved quickly to integrate encryption technologies across the portfolio. We shipped Symantec Endpoint Encryption 8.0, which supports a wide range of operating systems, including Windows, Mac OS X, Linux, Windows Mobile and BlackBerry. With the global enterprise sales force now selling our user authentication and encryption offerings, we are generating healthy pipeline growth.

In summary, the great strides we've made in effectively integrating acquired technologies and leveraging our distribution network are making a difference in our ability to drive value for our customers and our shareholders.

Now I'd like to discuss a few of the initiatives driving long-term growth for Symantec in the areas of mobile, virtualization and cloud adoption. Let's start with mobile. Mobile devices are increasingly being used in both our personal and business lives, offering productivity increases but also creating new security and management challenges. Our solutions manage and protect mobile devices by enforcing governance, securing corporate data and increasing visibility of all mobile platforms. We offer Mobile Management and Endpoint Protection capabilities for Android and Apple iOS, in addition to Windows Mobile, Symbian and BlackBerry. These solutions include features such as remote wipe, password policy enforcement and device inventory. Customers can utilize our DLP solutions to mitigate the risk of data loss through mobile devices. Our cloud-based e-mail security offerings allow enterprises to confidently adopt mobile solutions. In addition, our recent acquisitions extend our reach within the mobile markets with advanced mobile encryption and authentication solutions.

For the Consumer, our Norton Everywhere initiative provides a hassle-free online experience across mobile phones, tablets and smart devices. In January, we launched Norton DNS, which provides faster and more reliable Web browsing without requiring software to be downloaded onto the device. Our Norton Mobile Security offering is generating strong partner interest as we extend our multi-channel distribution network into these new areas. In retail, Best Buy Canada will soon offer Norton Mobile Security. Kingston Digital, the independent world leader in memory products and its software partner, FUHU, selected Norton as the security provider for their USB flash drives. Universo Online, Brazil's largest Internet service provider, began offering Norton mobile solutions to its customers. Expect to hear more about how we're expanding distribution of these new offerings at the Mobile World Congress in Barcelona next month. While still early, I'm pleased with the progress we're making in seeding the mobile market.

Moving on to virtualization. Organizations are increasingly adopting virtualization to reduce costs, enhance flexibility and build public and private cloud infrastructures. As a result, environments become more complex and leave mission-critical applications and data unprotected. Our solutions help organizations secure, manage and optimize their virtual environments from the data center to the endpoint. Our enterprise solutions are already helping customers secure information and identities in both the virtual and physical environments. Our Symantec Endpoint Virtualization Suite helps customers save operational costs, optimize license consumption and employ a hybrid virtual solution in their environments. In addition, upcoming releases of our Data Insight solution will allow products to proactively apply security and compliance controls in a virtualized world.

NetBackup helps organizations protect, deduplicate and recover information in both physical and virtual environments through a single unified platform. Results from benchmark testing conducted in partnership with Cisco and VMware highlight NetBackup's ability to protect more than 3,200 virtual machines on a single backup host and deduplicate more than 98% of redundant information. NetBackup received the Best of VMworld Award in 2010 as a result of its market-leading data protection and virtual machine capabilities. NetBackup has won awards for virtual server protection three times in the last four years. With its monitoring plug-in feature for VMware, Backup Exec is the leader in protecting virtual environments for small- and medium-sized businesses. This new capability reduces the complexity of protecting data environments as a result of direct integration with VMware's vCenter. Backup Exec now protects an impressive 40,000 VMware hosts and an estimated 1 million VMware guests.

For the data center, some of our new initiatives help customers virtualize applications and databases with confidence. Application HA and VirtualStore, jointly developed with VMware, enable organizations to accelerate the virtualization of business-critical applications and reduce storage costs in virtual environments. We are seeing very good customer interest of all these solutions and expect them to provide long-term growth opportunities for the company.

And finally, customer adoption of the cloud. We have a broad portfolio of cloud-based solutions and services, from SaaS security to authentication services and online backup to cloud infrastructure management. These solutions help organizations lower cost and simplify IT administration, while keeping their information and identities secure. In addition to our cloud-based reputation security service, which processes over 4 billion ratings per day, we are delivering innovative solutions that can be accessed anytime and anywhere. Norton Online Backup continues to expand its cloud presence, with 13 million users and 67 petabytes of stored data, a 35% increase year-over-year. As more customers use Web-enabled devices, it's key that they be able to access their personal files, videos and pictures from the cloud. Our internally-developed Norton Connect application allows Norton Online Backup users to access their online information from their iPhone, their iPad or their Android device. We recently expanded our global Web-based Norton Online Family solution to include a paid Premiere version, with features such as online video monitoring, 90-day histories and automatic activity reports. In the enterprise, our Symantec.cloud, or SaaS offerings, serve more than 9 million business users in more than 100 countries. We continue to realize growth in our cloud-based messaging and Web security solutions, as customers look to simplify operations and reduce costs. Symantec Endpoint Protection.cloud, our internally developed hosted endpoint protection service continues to garner customer interest from the SMB to the large enterprise.

We will continue to deliver additional cloud services, including Data Loss Prevention and governance offerings in order to extend our lead in this fast-growing market. Our Managed Security Services help customers drive efficient and effective security management. This outsourced service offers real-time protection, security monitoring, advanced analysis and early warning intelligence for companies of all sizes around the globe. Our solution enables clients to not only protect their information assets but also comply with industry regulations. As a result of increased demand for these types of solutions, our MSS business generated record double-digit bookings growth this quarter. Our backup solutions are integrated with Cloud partners such as Nirvanix to enable customers to utilize cloud solutions for disaster recovery and reduce information management costs. Our archiving solution enables customers to take advantage of cloud offerings, such as Microsoft Office 365 and Exchange Online while maintaining on-premise archiving for easy compliance and e-Discovery. Cloud computing creates opportunities for our Storage and Server Management business with SaaS providers and as customers build out their private clouds. Our platform-agnostic solution helps organizations reduce costs by commoditizing hardware and leveraging existing investments. Our products also help customers reduce complexity by simplifying the management of heterogeneous environments to build a scalable private cloud. In addition, we are able to help enterprise customers leverage public clouds. For example, customers who use Amazon's Web Services can leverage Storage Foundation to manage online storage without interrupting access to servers and critical applications.

In conclusion, these important trends will drive long-term growth for our company. I look forward to sharing more with you about the progress we're making with our customers and partners in these three areas. I'll now turn the call over to James to provide you the financial details for the quarter.

James Beer

Thank you, Enrique, and good afternoon. I am pleased to report that Symantec posted better-than-expected third quarter results for each of our key financial metrics. We generated strong bookings and cash flow from operations. Our solid performance in revenue and deferred revenue was driven by stability in the Storage Management business and strength in our Consumer, Backup and Data Loss Prevention businesses. GAAP revenue of $1.6 billion increased 5% in constant currency terms versus the December 2009 period. Excluding the purchase accounting deferred revenue writedown, revenue growth would've been 9% in constant currency terms. The content, the subscription and maintenance line grew 6% year-over-year and accounted for 84% of our revenue. Approximately 40 percentage points of this amount is subscription revenue from our Consumer, SaaS and Authentication solutions.

License revenue declined 1% year-over-year, reflecting the second quarter of stabilization, as compared to the previous six quarters of double-digit declines. The U.S. dollar strengthened 9% against the euro as compared to the year-ago period, decreasing our international revenue as measured in U.S. dollars. Foreign currency movements negatively impacted revenue growth by one percentage point year-over-year and positively impacted revenue growth by two percentage points sequentially. GAAP deferred revenue at the end of December 2010 reached a record $3.4 billion, up 12% year-over-year, well exceeding our expectations. This was driven by solid bookings worldwide and our recent acquisitions. The tax rate for the quarter was 24%, below our guidance of 27% due to a one-time benefit from the retroactive extension of the R&D tax credit and other one-time tax benefits recognized in the quarter. Net income of $272 million resulted in fully diluted non-GAAP earnings per share of $0.35. $0.04 of EPS benefit came from better-than-expected revenue, lower OEM placement fees and one-time tax benefits. These benefits were offset by $0.02 of EPS dilution from higher-than-expected sales commissions, given the strong bookings in deferred revenue generated in the quarter. Excluding the purchase accounting-related deferred revenue writedown of $64 million from our three recent acquisitions, EPS would have been $0.06 higher at $0.41. The acquisitions were approximately $0.03 accretive to EPS, excluding the deferred revenue haircut.

Looking at our geographic results, international revenue of $837 million increased 9% year-over-year and accounted for 52% of total GAAP revenue. Asia Pacific/Japan revenue increased 8% year-over-year, while the Europe, Middle East, Africa and Americas regions both increased 5% year-over-year. During the quarter, the euro weakened against the U.S. dollar while the yen and Singapore dollar strengthened against the U.S. dollar. We have accounted for these movements in our currency adjusted growth rates.

Now I'd like to move on to GAAP revenue and GAAP operating margin by segment. The Consumer business generated revenue of $498 million, up 5% year-over-year, as we leveraged our retail, OEM, ISP and online channels to attract and retain more consumers. Norton 360 generated another quarter of double-digit revenue growth and accounted for 38% of total Consumer revenue. We continue to expect stable revenue growth in the Consumer segment as we benefit from ongoing improvements in renewal rates, driven by our eCommerce platform, growth in PC units and enhancements to the trial experience. GAAP operating margin for our Consumer segment was 44% as compared to 43% in the December 2009 quarter. The operating margin improved year-over-year due to lower-than-expected OEM placement fees.

Turning now to our Enterprise business. We generated a total of 544 transactions valued at more than $300,000 each, up 18% year-over-year. 118 of these transactions generated more than $1 million, up 9% year-over-year. Of our deals valued at more than $300,000, 77% included more than one of our products and 38% of our deals over $1 million included sales from both our Security and Storage segments, emphasizing our ability to cross sell our broad product portfolio.

The Storage and Server Management segment generated revenue of $600 million, an increase of 3% as compared to the December 2009 quarter. Revenue from our Backup and Archiving business increased 5% year-over-year, driven by the strength of our integrated solutions focused on deduplication and virtual environments. Revenue from our Storage Management business increased 1% year-over-year. GAAP operating margin for our Storage and Server Management segment was 46% as compared to 49% in the December 2009 quarter, driven by higher sales commission expenses resulting from strong bookings growth during the quarter. The Security and Compliance segment generated revenue of $417 million, up 14% year-over-year, driven by strength in DLP and our acquisitions.

Total revenue for the acquired businesses was $66 million compared to our expectation of $56 million. The VeriSign security acquisition performed better-than-expected, generating revenue of $48 million, while PGP and GuardianEdge posted revenue of $18 million. The combined EPS dilution from these acquisitions was $0.035, $0.01 less dilutive than our expectation of $0.045.

GAAP operating margin for our Security and Compliance segment was 12%, as compared to 28% in the December 2009 quarter, primarily driven by increased expenses from our three acquisitions and higher sales commissions. Excluding the deferred revenue writedown, the Security and Compliance operating margin would have totaled 23%. Our Services business generated revenue of $89 million, as we continued to transition our consulting practice to specialized partners. Our Managed Security Services business generated double-digit bookings growth, driven by increased adoption of our information security services within the Enterprise segment.

GAAP operating margin for our Services segment was 7% as compared to 10% in the December 2009 quarter.

Turning now to total company margins, non-GAAP gross margin was 85.3% for the December 2010 quarter, down 110 basis points from the year-ago period, driven by the acquired VeriSign security business. Non-GAAP operating margin was 23.6%, down 460 basis points compared to the December 2009 quarter, primarily driven by our recent acquisitions and higher commission expenses. Excluding the effect of the acquired deferred revenue writedown, our operating margin for the December quarter would have been 26.7%. Cash flow from operating activities for the December quarter totaled $460 million, up 17% year-over-year as reported. Cash flow benefited from acquisitions, higher billings and lower tax payments. During the last 12 months, we have generated $1.8 billion in cash flow from operations. We exited the December quarter with $2.45 billion in cash, cash equivalents and short-term investments, with 49% of our cash balance in the U.S. During the quarter, we spent $265 million to repurchase approximately 16 million shares at an average price of $17.03.

We remain confident in the strength of our cash flow generation and continue to be committed to returning value to our shareholders. With that goal in mind, our Board of Directors has approved a new $1 billion share repurchase program.

Now I'd like to spend a few minutes discussing our guidance for the March 2011 quarter. We are assuming an exchange rate of $1.35 per euro versus the weighted average rate of $1.38 per euro and the end-of-period rate of $1.35 per euro during the March 2010 quarter. Our guidance assumes a common stock equivalents total for the quarter of approximately 775 million shares and an effective tax rate, before consideration of any loss from our joint venture, of 27%. Thus, for the March 2011 quarter, we expect GAAP revenue to be in the range of $1.585 billion to $1.605 billion, as compared to revenue of $1.53 billion during the March 2010 quarter. We are expecting acquisition-related revenue to total $70 million. The VeriSign security business is expected to generate $55 million and PGP and GuardianEdge are expected to contribute $15 million to our March quarter revenue.

We expect year-over-year revenue to be up 4% to 5% on an as-reported basis. GAAP earnings per share are estimated to be between $0.15 and $0.16, as compared to $0.23 in the year-ago period. Non-GAAP earnings per share are estimated to be between $0.35 and $0.36, as compared to $0.40 in the year-ago period. We expect $0.02 of dilution as a result of our VeriSign acquisition. PGP and GuardianEdge will be neutral to EPS in the March quarter as expected. In addition, our EPS guidance includes approximately $0.01 of dilution, resulting from our senior note issuance and credit facility replacement. Historically, PC unit shipments decline sequentially from December to March. While industry analysts are forecasting PC unit shipments to increase, a significant amount of unit growth will be driven from emerging markets. As a result, we expect OEM expenses to be flat sequentially.

Including $48 million of deferred revenue writedown amortization for the March quarter, non-GAAP earnings per share would be higher by approximately $0.05 and would be between $0.40 and $0.41. GAAP deferred revenue is estimated to be between $3.61 billion and $3.64 billion, compared to $3.21 billion at the end of March 2010. We are expecting deferred revenue to be up 13% to 14% on an as-reported basis. 67% or $1.07 billion of our March quarter revenue is estimated to come from the balance sheet. We are expecting another strong deferred revenue quarter, driving higher sales commissions as we complete our fiscal year.

In closing, we were pleased with our performance during the December quarter and will continue to focus on consistent execution, M&A integration and expense management. And now I'll turn it back to Helyn so that we can take some of your questions.

Helyn Corcos

Thank you, James. Gwen, will you please begin polling for questions?

Question-and-Answer Session

Operator

[Operator Instructions]

Helyn Corcos

While the operator is polling for questions, I'd like to update you on a few upcoming events. We will be presenting at the Goldman Sachs conference on February 16 and at the Morgan Stanley conference on March 1. We will be reporting our fiscal fourth quarter results on May 11. In addition, please save the dates for our Vision User Conference on May 3 and 4 and our Financial Analyst Day on May 26. More information regarding details and registration of these events will be distributed later in the quarter. For a complete list of all of our investor-related events, please visit our Events Calendar on the Investor Relations website. Gwen, we're ready for our first question.

Operator

And we'll take our first question from John DiFucci with JPMorgan.

John DiFucci - JP Morgan Chase & Co

James, first question is for you. And I'm curious if deferred revenue was better than you expected, are you seeing a return to customers being more willing to buy longer-term contracts, longer-term maintenance contracts?

James Beer

No, we're not seeing any change in the structure of the buying, if you will. It's very much the same sort of customer environment as we've seen in the last year or year and a half or so. We've just been pleased by the overall volume of bookings driving through to the third.

John DiFucci - JP Morgan Chase & Co

So it's just more license with more maintenance that's just driving it, just better business volumes.

Enrique Salem

No, what's happening, John, is that we're also seeing as our cloud-based offerings are more service-based, they create deferred revenue. So our MSS business performed very well. We continued adoption of cloud-based services. And those, our more subscription-oriented, they go onto the balance sheet.

John DiFucci - JP Morgan Chase & Co

And just a follow-up, Enrique, more on the Storage Management, you mentioned in your prepared remarks that it was now stable and you've seen the last couple of quarters where it had been a tough business. I'm just curious, though, I would think that most of that business at this point is maintenance or maintenance-like. And I would assume -- I guess, how should we be thinking about that going forward? Would we assume that, that stability would continue? And perhaps, could we see any growth out of that? Or is there a reason that we could see that decline again?

Enrique Salem

I think what we did at Analyst Day is we gave you a range, kind of thinking about a three-year view that basically says that business is flat to slightly down. Now what we're seeing, though, is we've gotten new solutions like Application HA and VirtualStore that we co-developed with VMware that are helping customers think about how they continue to migrate more of their infrastructure to use virtualization. So they're taking that, a lot of customers tell me they're about 1/3 of the way, maybe 40% through virtualizing their servers. With these new technologies, they now can think about how do they go to those production applications and move them into the markets. So, I think that we're clearly seeing some benefit from the new technologies that we started shipping in the last quarter of 2010.

Operator

And we'll take our next question from Brad Zelnick with Macquarie.

Brad Zelnick - Macquarie Research

Enrique, just as I look at the Consumer business, and it's a nice performance that reflects your industry-leading products. But I also look back over this past year, you have a PC cycle that peaked about a year ago, and you're still seeing benefits from the Digital River insourcing that you've done, which sounds like it's been very successful for you. But, as you look out onto the horizon, the future of the Consumer business, what are the growth drivers that you'll be talking about a few quarters from now? And what will be the needs of modernization when we look at that business in the future, beyond just the traditional model of converting trialware on PCs?

Enrique Salem

As we think about the Consumer business, you heard me talk a little bit about our Norton Everywhere initiative. And so what we've got to do is absolutely go beyond the PC. What Janice and her team are doing is they're thinking about a whole range of new capabilities. You also heard me comment on some new consumer services, the notion of how do we help customers, in effect, clean up their PCs, stabilize their PCs. And so there's a series of service offerings that we're bringing to market. So, it's a combination of going beyond the PC and also delivering new service-based offerings. And so you can take a look at a number of those new services. We're starting to see some good performance from them and they're also good differentiators. So bottom line is you have got to go beyond the PC.

Brad Zelnick - Macquarie Research

When I look at the large deal metrics, they seem fairly strong. But Enrique, in the past, you've talked about SMB being a very large opportunity for Symantec, and particularly VS, and things that you could do in the channel. I was wondering if you could give us an update. When you think about the mix of the business, what are you seeing downmarket? And are there any metrics that you can put that?

Enrique Salem

As we look at the SMB segment, it still remains a very big opportunity. An interesting stat for you is that there are roughly in the range of about 25 million, 26 million companies that are below the 25-user range. And so what that means is you have got to be able to capitalize on that lower end of the SMB segment. And so that's an area that we see a good opportunity. The other thing that's happening that's important is our partners are saying we want to be able to become more of a managed service provider. And so we're moving our capabilities to be integrated with some of the other platforms that are currently available one the marketplace and obviously, looking at how do we leverage some of our existing technology. As far as metrics, what I would tell you is the two big products that are sold into that segment are our Endpoint Security and our Backup Exec. And so the benefits over time will show up in deferred revenue, that we're seeing some of it there already, and then over time translating into recognized revenue.

Operator

We'll take our next question from Walter Pritchard with Citi.

Walter Pritchard - Citigroup Inc

Enrique, James, I was wondering if you could talk a bit about the Security business, which if I back out the SSL, it looks like it was about flat. And I know that you said DLP was strong. Just kind of want to get some more insight into what's going on in the core Endpoint and other businesses that contribute the majority of that business?

Enrique Salem

As you look at the Endpoint business, what we're doing there is we're continuing to simplify the offering and make sure that the low end of the market, as I just talked about in the previous question, doesn't have to install a full product. We're shipping new technologies, like Symantec Hosted Endpoint Protection, where we think that, that will be a nice driver for the SMB segment. If there was one spot where we've got to continue to work on improvement, I think it's in the SMB segment in EMEA, Europe, Middle East and Africa, where I think we're still a bit behind where we would like to be. And that's an area of opportunity for improvement.

Walter Pritchard - Citigroup Inc

And then I guess probably for Enrique, you as well, just on the FileStore appliances and the strategy there, I know you have the option with Huawei coming up here in a week or so to take the majority ownership, and you're starting to ship those appliances more broadly and really go after a new market there. I'm wondering if you could maybe kind of give us a picture of what you're thinking about there. Is this a market you think will be -- or a product area you think will be much bigger for Symantec that you'll take on the joint venture and become more of a hardware vendor? Just some understanding on kind of the strategy there will be helpful.

Enrique Salem

When we entered the joint venture, we thought about three important things. One, appliance form factors becoming more important to our customers. Two, we wanted better access to the Chinese market. And three, our partner has a big presence in the network side of the telecommunications providers. The joint venture is doing very well. They were able to exceed their plan for the full calendar year 2010. And so at this point, those three things are still important to us. You heard me comment about appliances. You mentioned the FileStore appliance. And so what we're doing right now is we're in active discussions with Huawei about how do we want to proceed with the joint venture. But right now, the joint venture is performing well, and it's creating value. So, we're obviously very engaged in those conversations. And we don't have an update right now, but over the next several months, we'll be able to comment more about the disposition of the 2% or potentially a little bit more.

Operator

We'll take our next question from Daniel Ives with FBR Capital Markets.

Michael Bauer

This is actually Mike for Dan. Just another quick question on the core Enterprise Security business. Can you just speak maybe just one the deal trends? And have you seen anything different in the competitive environment now that with the McAfee acquisition basically almost completed now?

Enrique Salem

What we're seeing now is we're absolutely winning deals in large enterprise from McAfee. And at this point, they feel like they are a bit of disarray. I mean, we've had a lot of their sales people in Europe come talk to us. We've customers asking the question, "Is McAfee going to get subsumed and become distracted?" And so we see there's an opportunity. Now that deal should close here momentarily, and I think that's where you'll really see the opportunity for Symantec.

Operator

And we'll go next to Heather Bellini with ISI Group.

Heather Bellini - ISI Group Inc.

Enrique, I was wondering if you could give a sense for the dilution that you're having on your GAAP margins this year as a result of the acquisitions. I know you mentioned that for the quarter you just ended. But, I'm trying to look ahead to next year, and assuming no other deals, how should we think about margins then stepping up from this dilution in fiscal '11 and fiscal '12. And then on top of that, at your Analyst Day back in May, you mentioned a GAAP margin target of 30% in fiscal '13. I'm just trying to get a sense for if you still feel comfortable with that.

Enrique Salem

Let me just give you a comment. Obviously, our goal in what we've been doing, Heather, is thinking about how do we grow the top line, but also we've got to continue to manage expenses. This quarter, we exceeded our deferred revenue about $200 million ahead of consensus, and that drove a bit higher commission expense. But ultimately, our goal is to continue to do a good job, an improving job of managing expenses. I'll let James comment as far as the dilution for next year from the current acquisitions.

James Beer

Well, it's a little early to be talking about the next fiscal year. But as I mentioned in my remarks, I would expect the PGP, GuardianEdge deals to be neutral to EPS even in the March quarter. And so, I would expect benefit in fiscal '12. And you see that same sort of trajectory around the VeriSign dilution as well. So, I would certainly be expecting to get to an increasing situation in fiscal '12. Ex the deferred revenue writedown, the deals are accretive already, again as I mentioned.

Heather Bellini - ISI Group Inc.

I guess what I'm trying to get at is given the margins you just guided to, if there is a 200 basis point hit this year in fiscal '11, if you think that you can then progress if you were to normalize for that in fiscal '12. I'm just trying to get a sense for how should we think of margin progression, and then just the target that you guys threw out at Analyst Day, of 30%, if that still holds, so then we could kind of string things together a little bit for modeling purposes.

James Beer

Well, this is one of the reasons why we go to the level of detail, so that you can see each of the primary lines of the P&L, ex the deferred revenue haircut. So, we've given the operating margin and so forth on a more neutralized basis, if you will. And as Enrique said, we'll continue to manage expenses in FY '12 very tightly. Again, as was the case in fiscal '11, we're looking to drive efficiencies in the traditional parts of the business in order to be able to put the right level of spending into the new areas of growth for the future. So, I would expect as we continue on through this FY '12 planning season that we're very much in the middle of right now that, that will continue to be the emphasis.

Operator

And we'll take our next question from Adam Holt with Morgan Stanley.

Adam Holt - Morgan Stanley

I had a follow-up about margins and specifically, the consumer margins. It looks like over the last couple of quarters, margins are stabilizing in the mid-40s. And I wanted to understand, I guess, first of all, is that an accurate statement? Do you feel like we've seen stabilization in the consumer margins? And to what extent would you expect the deceleration in the consumer PC market to potentially actually put upward pressure on those margins over the next 12 to 18 months?

James Beer

Well, I think you're right, Adam, in characterizing the consumer margins as having stabilized thus far in fiscal '11 versus the situation in fiscal '10. And I would expect that, that, too, will be what continues in the fourth quarter. And again, a little early to look beyond into fiscal '12, but we're pleased with that stabilization that we've seen in the margins this year.

Adam Holt - Morgan Stanley

And then if I could just drill down on the large deal activity, you had very good activity in sort of the medium-sized large deals and the larger deals. Now there's seasonality obviously in December. As you look in the pipe to your fiscal fourth quarter, do you see the same kind of mix relative to the larger deals? And from a product perspective, what's driving that? Is it more bundling? Is it bigger average deal sizes across a number of products? What's the driver there?

Enrique Salem

What I would tell, Adam, is very specifically, we're seeing that people are buying more of the portfolio. I think James commented about 77% of the deals had multiple products. And that's been one of the areas we've been pushing on pretty hard because when we do some of the analysis in our customer base, a lot of them, especially as you look at the Enterprise segment, which is below the largest companies, they have one, maybe two products. So, the ability to cross sell the portfolio is absolutely helping us. The other thing that's happening is customers are still not pre-buying the out years, years two and three, as they've done in the past. And so that's why we're getting the cluster of deals in that $300,000 and $500,000 range. But it's absolutely the benefit of our portfolio and the ability to cross sell.

Operator

And we'll go next to Brent Thill with UBS.

Brent Thill - UBS Investment Bank

Enrique, just on the deferred revenue, you're seeing deferred revenue growth that you haven't seen for quite some time. I guess, can you just give us what signs you're seeing that's giving you confidence that this is a sustainable trend versus just a snapback off of easy comps? Is there anything that's giving you more confidence that we're actually in a better spending cycle for a longer period versus just a quick snap?

Enrique Salem

What you want to look at is there's a couple of trends that are favoring or moving us to a more ratable or deferred revenue model. First, as we go to cloud-based services, if you look at MSS doing well, hosted services. And in hosted services, not just hosted messaging security, but you also have our trust services or SSL business, which is also a deferred revenue or ratable revenue recognition. So you've got a move to cloud-based services that's going to move to more of a subscription. I think the second part of it is, absolutely are seeing the good momentum in a number of different product lines that continue to drive that deferred revenue balance. And so, my sense is the biggest driver is the move to hosted or subscription-based products that will become ratable instead of license maintenance.

James Beer

The only thing I would add to that is that when you look at the history of our deferred revenue growth on a constant currency basis, both of the previous two December quarters saw growth of 3% year-over-year, even though the economic environment was clearly a very tough one in both of those periods. So, we're seeing robust growth of really reasonable basis in deferred revenue.

Brent Thill - UBS Investment Bank

And just a quick follow up, what percent of the revenue do you think could be hosted in a couple of years as a percent in the overall revenue?

Enrique Salem

I haven't done a recent calculation for a 12-month period, but again, we are seeing good momentum across the MSS business, the hosted services and the VeriSign trust services.

Operator

And we'll go next to Robert Breza with RBC Capital Markets.

Robert Breza - RBC Capital Markets, LLC

James, maybe can you talk to us about a little bit as you look at the strong bookings numbers, great deferred revenue strength, your guidance in deferred revenue, how should we think about that flowing through in terms of revenue model, maybe one or two quarters out? I mean, clearly, it looks clearly like bookings/deferred revenue are going to lead here. How should we think about the delay factor in terms of coming into the revenue model in terms of putting up double-digit growth?

James Beer

Well, if you take out deferred revenue balance, you can think of it flowing into the P&L over a 12- to 18-month period. And that's probably the good rule of thumb to be applying.

Robert Breza - RBC Capital Markets, LLC

That far out, 12 to 18 months?

James Beer

Yes. I mean, obviously, it depends on the mix of what's making up that deferred revenue at any particular point in time. But, it's a tail there, it's clearly not a straight-line function. But, over the next 12 to 18 months, it's generally where we see the balance of any point in time fully into the P&L.

Robert Breza - RBC Capital Markets, LLC

And maybe, Enrique, as you look at the joint venture, clearly, it seems to be benefiting you both, each party, is there any way to kind of strategically unlock some shareholder value here? Or how do you kind of look at that as you approach the board?

Enrique Salem

As I talk to the board, it's really continuing to execute against the priorities that we set for the business. We actually believe China is becoming more and more important going forward, and so that joint venture gives us a significant presence. I was in China in early December, and just the ability to have the largest tech company in China, basically, as your partner gives you a nice halo effect. And so, what we talk about is how are we doing against the strategic objectives of the joint venture? And what I'm happy to report on is across the three we outlined, we are doing exactly what we expected. And so, at this point, the joint venture, as it grows its revenue, is creating value and we expect to continue on that trajectory. So our goal is to work with Huawei right now to figure what is the best path forward for the joint venture with us and Huawei being its parents.

Robert Breza - RBC Capital Markets, LLC

If you look at the Consumer business, clearly, you talked about the data storage portion of it, and you gave some anecdotal evidence of the growth there. I mean, can you talk to us about how do we think about the additional services and the move to Norton 360 and the additional services versus kind of like this whole tablet phenomenon? Help us kind of think about the investor phenomenon, where you're offering a more service-orientated architectures opportunity for them versus this kind of declining PC environment to kind of help investors think about that?

Enrique Salem

Well, what we're doing is we're absolutely on a strategy, both for the Consumer and Enterprise business that is device-independent. We feel that we need to deliver capabilities on any device anywhere, anytime. And that's what Janice outlined for the Consumer business at the last Analyst Day. She talked about it under the Norton Everywhere title. And what we'll definitely do is continue to move in that direction. And what you should expect is over the next six to nine months, we'll continue to extend the capabilities across platforms. But today, with Norton Connect, you're already able to access the content that's being backed up using Norton 360 from your iPhone, from your Android device. And so, at this point, what we're doing is going to extend the capabilities so on any device, you'll be able to take advantage of the information you may be creating or using from your PC. So, the important notion here that customers are telling us is tablets and mobile devices are companion devices, not necessarily replacement. So, what we expect, while we may not see the same level of growth in the PC market, we do still expect growth in PCs. But then the ability to be across all of the devices is what becomes more important going forward.

Operator

And we'll take our next question from Katherine Egbert with Jefferies.

Katherine Egbert - Jefferies & Company, Inc.

I want to follow up on the closure of the McAfee deal. Enrique said very specifically that would help you. Are you running programs to convert customers once that deal is closing? And how many people do you expect to hire from McAfee?

Enrique Salem

I don't think we have a target as far as who we're going to hire. We're just saying that there is some level of interest in people to leave that organization. And so, our expectation is that, that will continue to create some disruption. As far as targeted programs, it's a competitive environment and we're always looking at ways to continue to gain share in the Security business until we've had a number of different programs, and we're obviously going to continue those programs as we move forward.

Operator

And we'll take our next question from Neil Herman with Soleil Securities.

Neil Herman - Soleil Securities Group, Inc.

Obviously, you showed a 12% growth in your deferred revenue line. Could you give us a sense from a longer-term perspective if we assume that the IT spending environment remains fairly stable and the overall economic environment remains fairly stable? Could you kind of give us a sense as to your longer-term growth objectives from a top line perspective over the next couple of years?,

Enrique Salem

As we look at it in the last Analyst Day, we talked about the portfolio, right? We have a portfolio of capabilities, and I don't think I'm going to change anything that James talked about. And so, as we think about it, it's absolutely -- we believe it's a mid-single-digits number that we are targeting right now. And the environment continues to improve from here. There'll be opportunities because from our perspective, we've got a fantastic portfolio, and it's getting better. But a lot of it, as you say Neil, is driven by what's happening in the overall IT environment.

Neil Herman - Soleil Securities Group, Inc.

And then I was wondering if you feel like you're through the drag associated with the end of the Oracle relationship? Or is that still somewhat of a continuing drag for you?

Enrique Salem

On specifically, the drag, we definitely feel that there's a little bit more to that pail. There's probably another six months or so left, where the Oracle deal is a bit of a drag. But, then we have new things, other partners, who are doing very well with that business, specifically HP and Linux or Red Hat, were showing real clear improvements. And then the big opportunity is clearly around VMware with some of the new capabilities around AppHA and VirtualStore.

Operator

And we'll take our next question from Phil Winslow with Crédit Suisse.

Philip Winslow - Crédit Suisse AG

Just want to focus in [ph] on your Enterprise business a bit. License revenue was only down, I think, of about 3% year-over-year, which has definitely been an improvement sort of each quarter over the past few quarters here. How much of that is just sort of the stabilization for the Oracle and the Storage Foundation business versus how much do you think you're seeing sort of just an improvement or stabilization in the sales force efficiency? And Enrique, what are the steps you think or, I guess, the milestones you look for that will start to turn that positive?

Enrique Salem

So Phil, you're right to say the headwind that we faced in the transition of Sun and the slowing of the Solaris platform has been a factor. And then you touched on the other side of it, which is sales force execution. I think that the combination of the product portfolio, we've got a lot of demand for products like DLP for products like NetBackup, and we've got a focused sales force. So that combination is what's driving the improvement. There's still more work to do, but I'm very pleased with how our sales force performed around the world. Usually, I'll talk about one region did well or another, but what I saw was consistent execution across the sales force across the world. And my expectation is that, that will continue into the March quarter and beyond.

James Beer

Yes. And I'd just further add that while the Sun-Oracle OEM contract certainly had an impact year-over-year on license revenue, and we would expect that to continue on for the next two or three quarters year-over-year, we saw very nice traction around products like NetBackup, Backup Exec, our Archiving products as well. And those are big drivers of license revenue.

Operator

And we'll take our last question from Philip Rueppel with Wells Fargo.

Philip Rueppel

A couple of clarifications. First of all, on the Enterprise business, the strength there, did you see the sales cycles contract? And if so, was that kind of a calendar year-end phenomenon? Or given your commentary about expected strength in bookings, is that something that's likely to continue and/or is that sort of a new normal?

Enrique Salem

I would tell you I didn't see a change in sales cycles. I think we had a robust pipeline going into the quarter, and we saw a good deal closure, but nothing different than we expected. As far as new normal, I think we've got good sales force execution right now. Team is doing very well, products are doing well, and so I expect that to continue into March and beyond.

Philip Rueppel

And then finally, a follow-up, of the three strategic priorities going forward, the mobile or the Norton Everywhere, is probably the less-developed but potentially has the biggest opportunity. You mentioned sort of six to nine months. Is that a timeframe where we could start to see meaningful bookings and some of these early wins start to become widely deployed? Or is it something that is going to take the better part of a year or two?

Enrique Salem

I think it will take -- it's a multi-year effort as this move to mobility continues to increase, and businesses and consumers think about what they need to do on those devices. Because it's not just a security play. One of the categories is how do you manage those devices. So it's a combination of management and security. When I mentioned six to nine months, you'll expect to hear more, for example, at the Barcelona World Congress. You'll hear some of the thoughts that we've got around new partnerships and new capabilities, expect to hear at Analyst Day later in May, specifically about some of the new initiatives. And so that's what I'm referencing in the six to nine months. But as far as the revenue and having a big impact on our total business, it will take a little bit longer.

Operator

And that concludes our question-and-answer session. I'd like to turn the conference back to Enrique Salem for closing remarks.

Enrique Salem

Thanks, operator. Well, I'm pleased with the team's execution in our better-than-expected December quarter results. I'm optimistic about our prospects for the March quarter, and so I'd like to thank everybody for joining us this afternoon. And I look forward to speaking with you again soon. Thank you.

Operator

Thank you, everyone. That does conclude today's conference. We thank you for your participation.

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